The central bank chief said caution would be used as the jobs picture improves but inflation remains muted. Her comments were received in a generally positive manner from the market, which pushed stocks further into record territory on hopes that the Fed would not move too aggressively in boosting its short-term interest rate target off near-zero levels.

"The FOMC's assessment that it can be patient in beginning to normalize policy means that the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings," Yellen said in prepared remarks before the Senate Banking Committee.

Market expectations had been for a June rate increase, but minutes released from the latest FOMC meeting have led some to speculate that a September move, or later, could be in the cards.

Yellen promised that markets would have plenty of notice.

Kevin Lamarque | Reuters

Janet Yellen

"If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance," she said.

In addition to her generally dovish remarks on rates, Yellen struck a politically vigilant tone when asked about a move in Congress, pushed in large part by Sen. Rand Paul, a likely Republican presidential candidate in 2016, to audit the Fed.

"I strongly oppose audit the Fed," she said.

Her remarks otherwise vacillated between broad-scale discussions on the path of rates to more granular issues of Fed parliamentary procedures.

Investors, though, were mostly looking for clarity on the big questions.

While Wall Street expects the Fed to hike rates mid-year, investors will be paying close attention to Yellen's statement and following question-and-answer session with Congress for guidance on the timing of a potential hike. Currently, the Fed pegs the targeted range for the federal funds rate at 0 to 0.25 percent.

In weighing when to increase rates, the Fed assesses progress toward reaching its two objections: fostering maximum employment and price stability through a 2 percent inflation rate.

While the labor market has improved, inflation has remained lower than the Fed's targeted 2 percent rate in part due to lower gas prices.

"It continues to be the FOMC's assessment that even after employment and inflation are near levels consistent with our dual mandate, economic conditions may, for some time, warrant keeping the federal funds rate below levels the committee views as normal in the longer run," Yellen said.